Mortgage is one of the most profitable tools for buying property in Cyprus.
Low interest rates and a variety of banking programs attract not only local residents, but also foreigners.
According to the Central Bank of Cyprus, the average lending rate has decreased by 5% since 2007 and today is 1.5-7.5% (but usually not higher than 2.5%). At the same time, the down payment is 20-50%, depending on the status of the borrower, and the payment can be extended for a period of up to 40 years, if the age of the borrower allows. However, the loan is usually repaid within 10 years.
There was a statement made in October by the chief economist of the Bank of Cyprus that average mortgage rates could increase from 2.5% to 5% by the end of 2022.
After evaluating all the pros and cons, it is important for future borrowers to choose real estate of an acceptable price category for purchase. Ideally, it should be a liquid object. A mortgage was created solely for the convenience of working with money and in no case should it become a heavy burden for the buyer.
Due to the fact that real estate and building materials are becoming more expensive, and mortgage rates may rise in the future, people who cannot really afford a mortgage are in a hurry to use a home loan. Hence, problem loans arise, for which the conditions of the loan agreement are not met. On the other hand, no one can be 100% insured against such a situation.
What to do if you can't pay the loan
If the creditor does not pay, the bank has the right to sue and demand compensation within the amount of the debt. As a rule, the bank compensates for missed payments by selling collateral. If it has already come to this, it is important to pull yourself together and act: evaluate your expenses, find ways to earn extra money, consult with industry experts.
Suspension of the Law on the Sale of Mortgage Assets
From time to time, there is a moratorium on the sale of mortgaged real estate in Cyprus. At different times in Cyprus, a deferment was given to borrowers with a basic mortgage property worth up to 350 thousand euros, commercial organizations with a turnover of up to 750 thousand euros and owners of small agricultural plots. By the way, the next moratorium expires by October 31 this year. At the moment, the government is preparing a package of proposals for the management of problem loans.
Today, credit organizations in Cyprus are overwhelmed with collateral objects that they cannot sell due to constant government moratoriums. In turn, such concessions have an extremely negative impact on the credit rating of the island.
Loan restructuring and loan holidays
Sometimes credit organizations go towards the borrower who asks to make changes to the existing contract. For the bank, this is an opportunity to avoid lengthy litigation and maintain customer loyalty. Usually, when restructuring a loan, banks reduce monthly payments by increasing the maturity of the debt and recalculating the interest rate.
A "credit holiday" is a period when the borrower may not pay installments or reduce the amount. As a rule, the conditions and possibilities for using the services are prescribed in the loan agreement. Typically, when restructuring a loan, the conditions are worse than a “loan holiday”, as the total cost of the loan increases.
Portrait of an ideal borrower in Cyprus
We have already written more than once about who most often Cypriot banks approve mortgages. First of all, these are people who are able to prove solvency and have the right to purchase real estate in the country. In priority are buyers permanently residing on the island and top specialists of stable international companies.
The borrower will receive a mortgage if his monthly payment does not exceed a third of the salary or 50% of the total family income. The bank must be sure that after all payments the borrower has enough funds to live on. In this case, the recipient of the loan must be over 18 years old, and his age at the time of full repayment of the debt to the bank should not exceed 65-70 years.
The ideal borrower willingly insures real estate, life and other risks. But he also understands the nuances of this delicate issue and knows how to save money.
Interestingly, in Cyprus, a real estate loan is approved even for foreigners and those who do not live in the country on a permanent basis, that is, non-residents. At the same time, it is more difficult to get a loan approved every year.
What to do if you need to sell a mortgage property
Mortgage housing is sold in the same way as conventional housing. Not so long ago we wrote a blog on this topic and since then little has changed. For the transaction to become possible, the seller only needs to obtain approval from the credit institution. To do this, he sends an application to the bank for issuing a letter with information about the amount of debt and a list of documents that are stored by the creditor.
Next, the buyer of mortgage housing sends a request to the bank to close the loan. At the same time, he has the opportunity to repay the loan in full or continue to pay the bank on a monthly basis. In each case, the issue is resolved individually.
Are there many who want to buy mortgage housing? Everything is for sale in Cyprus. The main thing is that the price of the exhibited object corresponds to market realities. In addition, such offers inspire confidence in those who are familiar with the banking system of Cyprus: creditors carefully protect the legal purity of the transaction.
Thus, if you change your mind, there is no need to wait 10 or more years before the loan is fully repaid. You can safely sell mortgage real estate, and otherwise even make money on this transaction.
According to the European Banking Authority (EBA), the overall situation in the European Union today is characterized by a shortage of supply, low lending rates and a discrepancy between inflated real estate prices and real incomes of the population. At the same time, Cypriot experts express confidence that the banking and real estate sectors of Cyprus were not affected by the general situation in the EU, since housing loans began to be actively issued only in 2016, and the 2013 crisis significantly slowed down the process of market recovery after the economic shocks of 2008.
According to data released by the Central Bank of Cyprus in mid-October this year, total non-performing loans decreased by 11% over the past month. At the same time, with the end of the program for subsidizing housing loans, the interest in mortgages on the part of the inhabitants of Cyprus in 2022 has cooled down a bit.
Interested in housing in Cyprus? Check the DOM Real Estate website! It has the largest real estate database in the country - more than 30 thousand residential and commercial properties throughout the island! Here you will find information about the latest development projects. Choose and contact professional boxers who will help you make the right choice!
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